Did you notice that international stock markets had a little party this week, despite worsening economic news? The latest US unemployment report is shockingly bad, most of the nation’s retailers are reporting double-digit declines in sales (bad news in a country where consumer spending represents two-thirds of GDP), and American stock markets remain in the tank, with the DJIA 40% lower than this time last year. And things don’t look much better in Europe and Asia, where signs of recession are multiplying despite frantic efforts to shore up their economies with stimulus packages and interest rate cuts.

Japan's Nikkei Index
Nikkei Index

So what should we make of the chart on the right?

It shows Japan’s Nikkei Index, which–despite all the bad news, and with no end in sight–experienced a significant surge on Wednesday.

UK FTSE Index
UK FTSE Index

In fact, markets around the world did a little happy dance following the US Presidential election.

Hang Seng Index
Hang Seng Index

Did someone declare a global holiday from doom-and-gloom?

French CAC40
French CAC40

Whatever it was, the words “President-elect Obama” seemed to make financial markets temporarily giddy and blissed-out, much like spectators in Grant Park on Tuesday night.

German DAX
German DAX

Here in Germany, people are celebrating and offering congratulations to any American they meet. They were practically singing “forget your troubles, c’mon get happy”–an unexpected burst of optimism in the nation that coined the term schadenfreude .

DJIA
DJIA

But it looks like Wall Street didn’t get an invitation to the party.

While the Dow was up on election day itself, once the results were in, it went right back down.

S&P 500
S&P 500

As did the S&P 500…

NASDAQ
NASDAQ

..and the NASDAQ.

Maybe the US markets are more in touch with the grim reality of the world economic crisis. Or maybe US markets are just more sanguine than others. That interpretation might seem risible given the extreme ups and downs we’ve seen in the past month, but it’s supported by the historical evidence. Over the past 50 years, momentous events in politics have rarely made much of an impact on US stock prices. Indeed, Cutler, Poterba and Summers showed in their 1989 Journal of Portfolio Management article that even events of world-historical significance, like the JFK assassination or the Soviet invasion of Afghanistan, have barely registered on the US markets.

Which makes it all the more fascinating to see the financial exuberance (which may or may not be irrational) that greeted the news of Obama’s election overseas. Let’s see if there’s another surge on Inauguration Day. And here’s hoping that next time, the party will last a little longer and include the US markets.

David Fitzsimmons, Tucson Daily Star, 5 November 2008

Ubiquitous in American commercial establishments, this object is a monument to the social meaning of money.

This one, snapped in a coffehouse in Santa Cruz, California, is based on a premise that any label-conscious teenager could explain:

How you spend is who you are.

Postscript: Tip Jar Theft

Several years ago, I heard from a friend who managed a teahouse in Providence, Rhode Island that the store’s tip jar had been stolen right off the counter; it had been placed in the traditional “tip jar spot,” right next to the cash register, in full view of the cashier, staff and other customers. The thief apparently just grabbed the beer stein full of change and ran out the door onto the crowded college-town main street before anyone could stop him.

This prompted a cascade of reactions on my part, in roughly the following order:

  1. Shock
    Tip jars, like the “poor boxes” found in many churches, are part of the informal “gift economy” that long predates the contemporary payment economy–the one in which money is transacted as payment for goods and services. The two economic systems coexist, sometimes clashing with and sometimes reinforcing one another.

    Stealing a tip jar is a lot like stealing the “poor box” from a church–it means taking gifts intended for other people. That makes it more than a property crime: it’s also a crime against the basic law of social life–reciprocity– which has been found in every society, everywhere in the world, in any historical period for which data are available. (I’m happy to send references to those who would like to geek out on this…)So the money in that tip jar was given voluntarily, like a gift, above and beyond the formal price of the good or service purchased. Whatever the tippers’ motives–perhaps gratitude for a good tea recommendation?–their gesture enacted an age-old practice that serves in part to express goodwill and fellow-feeling within what can otherwise be sterile, impersonal transactions.

    The tip jar theft story induces the same kind of shock we experience in response to any form of desecration–thus, you don’t have to be a Buddhist to be appalled by the destruction of the Bamiyan sculptures by the Taliban. By stealing the tip jar, the thief dragged an emblem of the pre-capitalist “gift economy” (back) into the commercial matrix, desecrating a symbol of secular sanctity. The result was a kind of reverse-transubstantiation: turning gifts back into “just money,” there for the taking by anyone willing to bear the social opprobrium.

  2. Surprise
    After I got past my initial “Dang, that is cold” response to the story, I started thinking like an economic sociologist again and my reaction turned to surprise…specifically, surprise that this was the first time I’d ever heard of a theft of this kind. And, like all good cases of feral economic sociology, it caused me to consider a question that had never before crossed my mind:

    Why don’t people steal tip jars more often?

    It’s money literally sitting on the table (or counter, as the case may be), open and unsecured. You’d think this sort of thing would happen all the time, and that businesses would either stop the practice of the tip jar entirely, or take measures to protect it from theft (as my friend did in his teahouse, by chaining the new tip jar to the cash register).

    Yet the very vulnerability of the tip jar, sitting there unprotected on the counter, is a very important part of its appeal and its symbolic resonance. Perhaps that’s why the custom persists, despite problems of theft. Display of an unsecured cache of tips, easy to spot and easy to steal, represents a very positive thing for any society: impersonal trust, the ability to rely on the basic honesty and fairness of strangers. On this, the integrity and robustness of whole societies, and particularly economies, depend. The past month in the stock market is a testament to what happens when people lose that trust, in one another and in institutions (Alan Greenspan, of all people, explained the problem very well in his 1999 commencement address at Harvard).

    The “invisible hand” is the one that isn’t stealing from the tip jar. Or the “poor box.” If I had to propose a “decline of civilization index,” the frequency of such thefts–along with the destruction of other public goods and symbols of impersonal trust–would rank high on the list of index components.